The Ukrainian mobile communications market is one of the country’s most competitive, with a dozen mobile services brands in the field and with the four largest mobile operators competing for the entire country and boasting coverage in every one of Ukraine’s 25 regions. The vast majority of customers in this huge market tend to use very basic mobile services.
As a result, one of the biggest challenges that the country’s leading mobile providers face is promoting usage of a wider variety of data services and working to make sure the infrastructure is sufficient to support the development of the Ukrainian mobile market to a level comparable with existing western European standards. Mobile operator life:) Chief Executive Officer Tansu Yegen has helped his brand to the cutting edge of the market and sees support for technological innovation and government support as crucial in maintaining the industry’s dynamics.
The 3G generation
“The greatest area for potential growth in the current Ukrainian mobile communication market is definitely in value-added services (VAS) such as data services. The percentage of data services for any mobile operator globally is around 14%. This figure rises to 25% in more developed markets. It has been estimated in western Europe that the average is currently 17% but by 2010 this will reach 26%, which also reflects the impact of 3G infrastructure,” explains Yegen.
“We think it is very important to develop 3G technology in Ukraine. In western Europe 3G revenues are already approaching GSM revenues and it is widely expected that 3G revenues will actually surpass GSM revenues by 2009. In eastern European countries such as Ukraine we expect 3G revenues to overtake GSM revenues by 2014.”
Yegen points out that the high cost of 3G phones is no longer a problem as evolving technology has brought the price of handsets down to everyday consumer levels. “There were affordability issues because of the prohibitive price of compatible handsets, but on the European market 3G handsets now sell for USD 70-80, which has effectively served to remove this price barrier.”
Yegen sees a number of different factors determining subscriber loyalty but sees the key motive as price sensitivity. Each market segment has its own specifics, and network quality is also influential. “If we look specifically at corporate clients, one of the reasons why they might choose to switch operators is network quality, because such users want to have reliable mobile services which they can trust to work all the time, without interruptions.”
The Ukrainian market boasts huge GSM penetration already, which currently stands at around 110% and is expected to reach 122% by the year’s end and there are more SIM cards in use than there are Ukrainians. “This is explained by the fact that around 35% of subscribers have two or three SIM cards,” Yegen says. “It is fascinating to note that so many people are carrying these additional SIM cards in their wallets and simply interchanging them depending on whom they are calling. The reason is simply that rates are too high for calls between different providers and as a result Ukrainians try not to call other operators and would rather change their SIM card to keep costs down. For mobile users who prefer using several SIM cards we introduced a double SIM card mobile phone which can accept two SIM cards simultaneously; one from life:) together with a card from another operator. We have witnessed huge interest in this offer from customers.”
Change provider, keep your number
As the various mobile providers battle it out for market share and count up their subscribers, the government is also considering a law on number portability which would allow subscribers to switch providers while keeping their existing numbers, something that could well prove to be a watershed for the Ukrainian market as a whole. “The law has been endorsed by the Verkhovna Rada and although the President has yet to sign it we hope it will happen after the elections. Once we have number portability I expect the percentage of subscribers moving from one operator to another will be no more than around 5%, although that’s still a pretty high figure when you consider that we have a total of 50 million existing subscribers throughout Ukraine. The point is that once this law is in place all operators will be obliged to make maximum efforts to satisfy their existing customers, and they will also create special loyalty programmes and incentives to keep customers as members of their network.”
Crisis? What crisis?
The current political instability has not had much of an impact on the economy or the expansion of the mobile phone industry, something which has personally impressed Yegen. “I admire Ukraine in this sense,” he acknowledges. “GDP growth has been around 7.6% during the first six months of 2007. I think the government is doing a great job by not allowing political instability to cause economic instability. We didn’t experience any delays in terms of our initiatives. There are few issues including a number portability law which remain unresolved, but they will just have to wait until after the elections, and the fact that such a draft law was endorsed in the parliament is commendable in itself.”
While the so-called crisis has failed to stall the mobile market’s expansion, Yegen remains optimistic on the government’s mobile communications policy. “Ukraine deserves to have the highest technologies available to every citizen: 3G should be here, WiMAX should be here. Every Ukrainian citizen should be able to access the Internet without any problems, wherever they are located, but unfortunately I don’t see that happening at the moment. It is all very well for Ukrtelecom to have a 3G license, but my feeling is that it’s a little bit unfair to other operators who were not given the same chance to develop this technology. It’s very important these technologies are supported to allow us to close the technology gap. In Scandinavian countries, for example, 3G licenses have been simply awarded with no fee charged. As a result 3G usage in that region is much, much higher than anywhere else.”
